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Business taxes: Filing requirements for sole proprietors
 If
you are a self-employed sole proprietor and earn at least $400 in
a calendar year, you have to file an income tax return, using Form 1040.
To figure out your net profit and loss from business,
use Schedule C and attach it to Form 1040.
Federal income tax returns must be postmarked by April
15 if you operate on a calendar year. If you use a fiscal year,
your return is due on the 15th day of the fourth month after the
end of your year. Late filing may result in stiff penalties and
interest. Use Form 4868 to request an automatic four-month extension
if you think you will miss the deadline. It excuses you temporarily
from filing the form, but the tax is still due.
Your return may be due only once a year, but the IRS
calls income tax a "pay-as-you-go" tax, a nice way to say it wants
a percentage as soon as you get paid.
Most employers withhold a portion of workers' pay
to submit to the government periodically. Self-employed people pay
an estimated tax.
You pay only if you expect to owe tax on income of
$1,000 or more. You have to make quarterly payments on April 15,
June 15, Sept. 15 and Jan. 15. You pay tax only when you receive
income. For example, if you received no income until May 10, you
would pay estimated tax in June.
There are three ways to make an estimated tax payment:
- Mail in a payment voucher from Form 1040-ES
- Pay electronically using the Electronic Federal
Tax Payment System
- Credit an overpayment on your return for the next
year's estimated tax
Use Form 1040-ES to figure and pay the tax. For more
information on estimated tax, see Publication 505, Tax Withholding
and Estimated Tax.
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